Star Wars: Episode VII – The Force Awakens made $57 million domestically Thursday, enough to set a record but not to satiate Wall Street’s fears over Walt Disney’s television business.
On Friday, Disney shares closed off 4 percent, nearly twice that of the broader markets, as the conglomerate was the topic of at least two negative research notes in the past two days.
On Friday, BTIG analyst Richard Greenfield downgraded Disney to “sell” and put a $90 price target on the stock, suggesting it will fall about 16 percent in the next 52 weeks or so.
“Even The Force cannot protect ESPN,” Greenfield wrote, accusing management of “overpaying for sports rights based on overly aggressive multichannel video subscriber projections.”
Greenfield says Disney’s cable network operating income will shrink in fiscal-year 2017, causing total Disney operating income to be flat.
He also says Disney damaged its long-term prospects for cable in general “by aggressively licensing content to SVOD platforms such as Netflix to prop up near-term earnings.”
He says Force Awakens could earn $2.6 billion worldwide, leading to better-than-expected earnings for fiscal-year 2016, but the next two years after that will be a problem for Disney.
And if Force Awakens doesn’t exceed $2 billion, look out below.
A day before Greenfield’s note, Benjamin Swinburne of Morgan Stanley raised his estimates for Force Awakens but lowered them for ESPN, and he reiterated his $108 price target, which suggests the stock will remain flat for the next year or so.
Swinburne said Force Awakens could earn as much as $220 million domestically opening weekend, $750 million total domestically and $1.5 billion internationally.
“However, lower estimated ESPN revenue growth and tough licensing (comparisons) against Frozen fully offset” the positive projection for Force Awakens, he said.
Of course it’s not all doom and gloom for Disney (not by a long shot), as the stock is up 10 percent from its August low, when the company first warned of slowing growth at its television segment.
Plus, Disney received a glowing report Friday from Moody’s, which says the release of Force Awakens positively affects the company’s credit and proves that the $4.1 billion acquisition of Lucasfilm in 2012 will be highly lucrative.
“The Star Wars franchise is uniquely multi-beneficial to Disney and clearly the evergreen intellectual property further diversifies and strengthens the company’s foundation alongside its most important franchises,” said Moody’s.
Disney shares closed $4.29 lower on Friday to $107.72.
Email: Paul.Bond@THR.com
